noesis report digital v2

www.noesis.co.inAn exclusive study by Noesis

A 360 degree view of the hotel rebranding phenomenon in India

Deep dive into the most exciting rebranding transactions by the most prominent brands in last couple of years

TheCONVERSION

“Indian hospitality is a sleeping giant, waiting to be poked. Travel is no longer just vacation or business- It’s an experience. Noesis continues to delve its expertise in the assistance of curation of these experiences.”

-Nandivardhan Jain, CEO

A Decade of Excellence

NOESIS COMPLETES

Y E A R S

A widespread growth tactic in the hospitality industry is ‘Hotel Conversions,’ also known as reflagging or rebranding.

Conversion is the process of a branded hotel chain

adopting a standalone hotel or another hotel brand under

its wing. While this phenomenon is decades old, we

decided to look closer at many of its facets like

performance effects of hotel conversions, brand

positioning, the many benefits of conversions, its

downfalls and how to strike a perfect balance in this act.

The hospitality and tourism industries cannot be isolated

from Geo-political and economic dynamism. This being

said, successful hotel conversions take more than just

change of hands - it needs a carefully crafted strategy,

with underlying market awareness.

While standalone hotels undergo conversion for a multitude

of reasons like a shift in corporate strategy, aging of the

property or demographics, the most popular reason remains-

empire building.

Conversion of Hotels

THE SHORTER ROUTE TO EXPANSION

Strategically, the phenomenon of hotel rebranding is quite

logical, given the intensity of competition in the hotels

industry. Conversion has been widely resorted to as an

expansion tactic by hoteliers, in order to increase their

market share quickly with minimum investment of time

and resources.

Typically, in India, the developmental cycle for a new hotel is 5 to 7 years. Long gestation periods, development hassles, administrative loopholes, make this process cumbersome in addition to the burden of large investments.

A perfect example for this is the IHG’s (Intercontinental

Hotels Group) all-out expansion strategy where they take

over 14 of SAMHI’s properties to convert them to Holiday

Inn Express. This bold move increases IHG’s room

strength to approximately 9000 globally, which is a 50%

increase in just a single year.

As all hotels are expected to be operational within a

year’s time span, IHG’s total hotel count will increase to

over 40.

Many hospitality groups have fetched the concept

of making ‘baskets’ or ‘groups,’ to reinforce

standardization of their product and service level.

EVOLUTION OF THE CONVERSION PHENOMENON

take over 14 of

Propertiesto convert them to

50%IHG’s room strength to approximately

9000 IN A YEARI N C R EAS E

These baskets/groups refer to different products (brands)

under the same management. This is refreshing for the

hospitality industry to advance from the conventional

conversion formats where standalone hotels were taken

under a single umbrella. Hotel properties are allotted to

different baskets basis multiple parameters to decrease

dissonance in the offering and managing customer/guest

expectations. This allows the user to draw parallels while

navigating through different geographical/chronological

experiences. For example, Lemon Tree Hotels and

Inter-Continental have actively pursued this exercise. A

customer frequently staying in Lemon Tree properties, in

different cities, over several months will find a certain

level of consistency in all these

experiences. When the same customer

will be traveling to a new city for the

first time, he will not hesitate to book

with Lemon Tree hotels because of

powerful brand associations.

‘Conversion-friendly’ brands allow a quick entrance to newer markets, while also simplifying the entire cycle.

A Mini Guide to Conversion for Hotel Owners

On the onset, the owner involves an expert to

conduct a preliminary study and a gap analysis.

This highlights the hindrances in the current

scenario and true potential of their asset.

This will enable the owner to set base

objectives and performance goals which will

serve as a reference point in the process of

selection of an operator.

The experts perform the necessary due

diligences and perform checks and balances

on the operational processes.

The next step is identifying whether the hotel owner should opt for a management contract, lease or a franchise.

At the core of the process is:

L E G A L D U E D I L I G E N C E ;

T E C H N I C A L D U E D I L I G E N C E ;

F I N A N C I A L D U E D I L I G E N C E

Property

Luxury Upscale Midscale Economy

RFP- Request For Proposal

Evaluation of Operator’s Responses

Shortlisting Operators

Evaluation of Final Proposals

Final Negotiation & Selection of Operator

S TAG E

Macro Market

Micro Market

Analysis of Location

Age of the product

Inventory

Banquet, Parking Facilities

& Other Amenities

Analysis of Demand& Supply

Analysis of Competition

Profitability Prognosis

Evaluation PA R A M E T E R S U N D E R C O N S I D E R AT I O N

F O R M AT S

C AT E G O R I Z AT I O N

Product

C O M P E T I T I V E O P E R ATO R S E L E C T I O N

P R O C E S SB R A N D F I T

1 4

52

3

1

2

3

Where do I fit

Is there a scopefor renovation

STEPS INVOLVED IN CO NVERTING YO UR PRO PERTY

D O C U M E N TAT I O N

I M P L E M E N TAT I O N O F P I P

H R P R AC T I C E S

F I N A L I Z AT I O N O F B U D G E T S

Negotiating term sheet/MOU

Execution of term sheet/MOU

Property Improvement Plan (PIP)

Finalization of Hotel Operations and Management Agreements

Selection of GM

Hiring/Training of Staff

F I N A N C I A L R E S U LT S

Economy

O F B R A N D

Onboarding

Set the rightE X P E C TAT I O N S

4

5

End-to-end synchronization

between Owners & Operators

STEPS INVOLVED IN CONVERTING YO UR PRO PERTY

Optimization of Cost

of Operations

Average Room Rate

Occupancy Rate

F&B Revenue

Gross Operating Profit

1 4

52

3

When a renowned brand takes over a hotel, the property is

expected to demonstrate a few spontaneous results. But there’s

more to this than meets the eye!

StandaloneHotel

Brand

Rebranded

x

y

x+y

x = PIP (Property Improvement Plan) y = POP (Property Operational Plan)

Unleashing full potential of aconversion transaction

The first and the most obvious value addition to the property is the

brand value, ‘x’. The association with an established, credible name

provides the first jump of many. The brand has an audience of its own,

which the hotel can now leverage.

However, is the hotel fully prepared to absorb this clientele?

The hotels sometime fall short in gauging the evolution of

this audience and customer group, which has now a

different set of expectation with respect to the level of

service and product. It’s this benchmark, which the new

entity needs to now provide. In other words, the mere

association with a name will not be enough in unlocking

the full potential of a rebranding exercise.

Fortunately, the phenomenon of reflagging often entails

improved marketing support, an extensive distribution

network, technological advancements, new management

information systems, which promises a higher churn of

revenue and a drastic improvement in the occupancy rate

and ARR. This makes the non-physical foundation of the

property much more stable to upgrade their level of

services.

An effective Property Improvement Plan (PIP) helps the

owner enhance user experience, increase profitability,

create a distinctive offering and gain a

larger market share. While primitively,

elements like lighting, sanitation,

spacing, food & beverage were the

foundation for branding standards, but

now new variables are entering the

equation. The focus has reduced from

rigid parameters like carpet area to

environment friendliness and green

practices.

The last leg, however, still remains with the incorporation of a sustainable practice. Let us now looker deeper into this variable, y, which unleashes a sustainable and complete value addition to a rebranded hotel.

To supplement and bankroll the Property Improvement Plan, a rebranding exercise needs aProperty Operational Plan. These supplements include a comprehensive sales & marketing programme, an operational and HR standard operating procedure for continual performance levels.

What’s y?CORE COMPONENTS

∙ Sales & Marketing Channels

∙ Operational Efficiencies

∙ Technological Advancement

SALES & MARKETING CHANNELS

In a saturated distribution landscape, Global Distribution

Systems (GDS) is an important channel to expand your

market reach globally. This tool isn’t an exclusive lodging

aider; it works similarly for airlines and local travel

rental companies.

This sales channel is a source of stabilizing revenues and

decreasing volatility by nurturing healthy, long-term

relations/partnerships, which provides access to a large,

continuous customer base. Apart from lodging, hotels

should also consider deals for their food & beverage

set-up, and aim for a broader hospitality partnership to

service all needs from hosting conferences, office parties

and gatherings to accommodation across geographies.

OTAs provide instant access to a large online community,

who are potential customers, at a fairly low cost.

However, it is important that the hotel manages room

bookings across several OTAs, their own website and

offline sales using a competent software. The full benefit

of OTAs can be derived through incorporating a good SEO

and digital presence strategy.

While the surge in online transactions is

evident, a target group still remains

offline. Demographically, people with

higher age and higher income, prefer

offline agents who customize their

service and help them plan their travel

with greater comfort.

A loyalty programme is a way to make

loyal customers feel special while also

attempting to extend the longevity of

this patronage. Incentives, however, are

useful only when the users trust the

brand and experience continuous value

addition at all touch points.

Nothing is a replacement for a direct

engagement platform in the hospitality

industry. Interacting with customers,

encouraging positive reviews and

taking corrective measures for negative

feedback goes a long way for a brand.

Global Distribution System

Corporate Tie Ups

Offline Agents

Loyalty Programmes& Reward Points

Online TravelAgents Online Media

Presence

Identifying needs

Needs assessment

Develop training objectives

Evaluate training effectiveness

Conduct training

Develop training plan

Training process (modified from Hayes & Ninemeier 2009,189)

In the hospitality space, especially the sales verticals, technology innovation is crucial in order to evolve dynamically. Customer Relationship Management (CRM) platforms, Enterprise Resource Portals, Point-Of-Sale (POS) tools should be an integral part of the organization.

OPERATIONALEFFICIENCIES

• Continuous training through a regulated schedule

• Identify, analyze, implement, monitor training needs

• Recruitment of higher quality staff

• Orient new staff adapt to the organization’s culture

• Outsource new trainings to experts

• Motivate your staff!

ADVANCE TECHNOLOGICALLY

As per our research, for the given database, 7972 rooms have been conversions in the organised space.

TOP CONVERSIONS IN THE L AST 3 YEARS

B R A N D C I T YC O N V E R T E D

P R O P E R T YR O O M S

Vadodara

Delhi

Gurgaon

Bangalore

Rishikesh

Bangalore

Kolkata

Bangalore

Rajkot

Agra

Dharampur

Kathmandu

Goa

Grand Mecure

Bloomrooms Janpath

Bloom Boutique Gurgaon

Bloom Boutique Indiranagar

X Hotel by bloom Rishikesh

X by bloom Indiranagar

Ibiza The Fern Resort & Spa

The Fern Residency Yeshwantpur

KK Beacon

Howard Plaza The Fern

The Fern Surya Resort

The Fern Residency Platinum

Hard Rock Hotel, Goa

146

39

45

30

39

23

120

64

35

86

41

58

135



Pune

Nashik

Ahmedabad

Bangalore

Hyderabad

Gurgaon

Chennai

Hyderabad

Pune

Greater Noida

Yeshwantpur

Goa

Mussoorie

Holiday Inn Express Pimpri

Holiday Inn Express Nashik

Holiday Inn Express Ahmedabad

Holiday Inn Express Bangalore

Holiday Inn Express Hyderabad Banjara Hills

Holiday Inn Express Gurgaon

Holiday Inn Express Chennai

Holiday Inn Express Hyderabad HiTech City

Holiday Inn Express Hinjewadi

Holiday Inn Express Greater Noida

Holiday Inn Express Yeshwantpur

ITC Grand Goa, Resort & Spa

WelcomHotel The Savoy

142

101

132

161

170

205

149

150

104

137

118

252

50




Hyderabad

Chandigarh

Gulmarg

Amritsar

Srinagar

Bhiwadi

Alwar

Alwar

Mussoorie

Katra

Vijaywada

Gwalior

Rishikesh

Lemon Tree Hotel, Banajara Hills

Red Fox Hotel, Chandigarh

Lemon Tree Hotel, Gulmarg

Lemon Tree Hotel, Amritsar

Lemon Tree Hotel, Srinagar

Red Fox Hotel, Bhiwadi

Lemon Tree Hotel, Alwar

Red Fox Hotel, Alwar

Lemon Tree Hotel, Mussoorie

Lemon Tree Hotel, Katra

Red Fox Hotel, Vijaywada

Lemon Tree Hotel, Gwalior

Lemon Tree Premier, Rishikesh

85

102

35

65

37

130

40

49

40

70

90

104

66



P R O P E R T YR O O M SB R A N D C I T Y

C O N V E R T E DP R O P E R T Y

R O O M S

Morjim

Pune

Thrissur

Bharuch

Bhavnagar

Mahabaleshwar

Dwarka

Bangalore

Pune

Goa

Chennai

Indore

Ahmedabad

Red Fox Hotel, Morjim

Lemon Tree, Viman Nagar

Lords Resort Cheruthuruthy Thrissur

Lords Eco Inn Bharuch

Lords Resort Bhavnagar Inn

Saj Resort by Club Mahindra

Club Mahindra Dwarka

Fairfield by Marriott




Marriott


83

69

54

48

41

78

44

104

109

130

107

218

173







Mint Tarika Resort, Chail

Mint Koregaon Park

Mint Salisbury Park

Radisson Blu Kochi

Radisson Srinagar

Country Inn and Suites by Radisson



Park Inn by Radisson

Park Plaza Chennai

114

140

232

65

39

36

150

89

80

100

55

70

129


Chennai OMR

Chennai Mahindra World City

Gachibowli

Chail

Pune

Pune

Kochi

Srinagar

Gulmarg

Sonmarg

Jammu

Lajpat Nagar

Chennai

B R A N DC O N V E R T E D


Mumbai

Dharmashala

Hyderabad

Dwarka

Dahej

Chennai

Kolkata

Ludhiana

Nashik

Delhi

Jaipur

Ranchi

Shimla

Radisson Goregaon

Radisson Dharmashala

Park Plaza Hyderabad

Regenta Inn, Dwarka

Regenta Central, Dahej

Regenta Central Deccan

Regenta Inn Larica, Kolkata

Regenta Central Klassik, Ludhiana

Regenta Resort Soma Vine Village, Nashik

Taurus Sarovar Portico

Sarovar Premiere Jaipur

Le Lac Sarovar Portico, Ranchi

Marigold Sarovar Portico, Shimla

98

121

100

57

69

93

45

75

32

83

80

54

47


C I T Y



Bangalore

Coimbatore

Kumarakom

Jaipur

Thane

Gurgaon

Jaipur

Dehradun

Ajmer

Bangalore

Pune

Lonavala

Pune

La Marvella, Sarovar Premiere

Zip by Spree, Coimbatore

Park Regis Aveda, Kumarakom

Park Regis, Jaipur

Hotel VITS Thane

VITS Mango Blossom, Gurgaon

Ramada Jaisinghpura

Ramada Dehradun

Ramada Ajmer

Zone by the park Electronic City

7 Apple Hotel Pimpri

7 Apple Resort Lonavala

7 Apple Hotel Viman Nagar

102

85

42

72

33

37

97

52

71

70

64

42

49


B R A N DC O N V E R T E D

P R O P E R T YP R E V I O U SP R O P E R T Y

R O O M S

Hyatt Place, Goa

Hyatt Bangalore

Hyatt Amritsar

Vivanta Lucknow

Vivanta Fort Aguada Goa

Vivanta Holiday Village Goa

Vivanta Coorg

The Gateway Resort, Corbett

Jai Mahal Palace, Jaipur

Vivanta Hari Mahal, Jodhpur

Vivanta by Taj Bekal

Hyatt Centric

Hyatt Centric

Hyatt Regency

Taj Mahal Lucknow

Taj Fort Aguada Resort

Taj Holiday village

Taj Madikeri Resort

Taj Corbett Resort

Taj Jai Mahal Palace

Taj Hari Mahal

Taj Bekal

147

143

248

110

145

142

62

61

100

40

66


INTERNAL REBRANDING

Accounting for the complete costof rebrandingWhile all owners are mindful of the gigantic and obvious costs involved in rebranding such as updating signage, information systems and upgrading facilities, of course, but devil lies in the detail- owners should watch out for the finer points like termination fee with an existing brand, cost of termination of staff, etc. Small punches when multiplied may have an impact on your plan!

Maintaining your Online Presence According to a Trip Advisor Survey, there are 200 new user contributions to TripAdvisor every minute. In another research, it was found that 95% of users check for reviews (about 6-7 per property) before making reservations. This highlights the importance of managing both positive and negative feedback sensitively.

Repositioning It is important that hotel owners renovate their branding strategy, too! Along with changing your online media avatar, it is important to dissociate with the previous one. So go all out and make an entrance!

Not evolving with the changing needs ofthe customers It’s great if your customers love you! However, these customers are smart- they have exposure to too many alternatives. So, the brand needs to be on a constant look out for improving and evolving with changing customer needs!

COMMON DOWNFALLS

A CLOSER LOOK:

From a complete revamp in physique of the façade and the rooms to reworking operational procedures, the work behind Park Inn was quite evident in its numbers:

About half a century old, Erstwhile Vikram Hotel,

underwent a transformation in December 2016 and

adopted a new avatar under the wing of Radisson group

as Park Inn.

This is a perfect example of a successful hotel conversion

to unleash its potential. Within a year of undergoing this

makeover, it witnessed an 83% increase in RevPAR with

an average ROI of 37.5% on it’s cost of conversion.

Zubin Saxena Managing Director and VP Operations, South Asia at Radisson Hotel Group

Conversion of an existing independent hotel to an

internationally branded hotel can be significantly

beneficial to the ownership not only because it offers a

huge upside on the project returns but also because it

turns out to be a fantastic approach to asset

management.

Access to a widespread distribution system, global

brand recognition, robust operation systems, upliftment

of the physical product, maximised revenue and

optimised cost of operations are obvious outcomes of

this excercise.

Such conversion, from owner's point of view typically is

a fresh long term lease of life to the hotel asset through

total revamp and repositioning and a relatively quicker

Highlights

• Hotel closed at an occupancy % of 90 for the year 2018.

• Operational GOP of above industry standards for the year.

• More acceptance on online platforms

• Growth on corporate business.

• Increase in room rate from corporates, PSU and other government bodies.

• Increase in conference and other allied business.

• Increase in Social acceptance from Locals resulting in footfall.

• Over 40 % increase in international travellers.

• Cost control on OTA due to umbrella rate structure.

• Attract quality and skilled human resource.

access to strong locations in various

markets for the hotel brand.

However, such relationship

establishment tends to be complicated

due to certain issues such as FLS

compliance, limitation on available

inventory, brand fitment and owner's

willingness to make commensurate

investment.

With successful track record of such

conversions, Radisson Hotel Group

sees tremendous opportunity in this

space and continues to be excited

about converting and operating

existing assets of like-minded owners"

ForconclusionBuilding a continuous, sustainable hospitality brand is more than an association with a name. It involves a carefully channelized concentrated effort throughout the organization.

A mechanism to facilitate organization-wide planning, implementation and control is needed with a layer of strategic management.

Rebranded hotels need to emphasize on sales and

marketing, operational excellence, financial techniques,

training, staff motivation and customer focus to remain

competitive and continually develop their competitive

edge.

Project Operational programs nurture diverse objectives-

retaining customers, checking rising expenditure, and

gaining client insights. This is why it’s important that each

program should have an a unique set of goals and

customized action plan to achieve those.

While preparing the Property Operational Plans, it is

essential to evaluate the present level of product, service,

customer satisfaction and brand equity. In the next step,

while curating the content of the

program, it is important to work without

bias and keep the goals aligned.

Today, the hospitality industry is

saturated and customers are spoilt for

choice, making them vulnerable and

prone to switch to other brands.

Acquiring customers and growing a

business means needs standardizing

level of product and service, evolving

with changing customer needs and

gaining a customer’s emotional

attachment to the brand.

The most successful, enduring and

profitable rebranding cases are

flourished when both, owners and

operators, work with real market

insight. Conversions are successful

with an understanding of when and

how to evolve strategic

decision-making, visualize your

property and service with changing

customer needs, and continuously

strive for operational excellence.

“We take an involved and intense journey of aligning existing hotel’s product and experiences to our brand standards by working closely with hotel owners- whether it is incorporation of FLS standards at project stage, uplifting operational standards, training staff on our electronic portals and processes as well as re-moulding guest perception about previous branding of a hotel. 40% of our projects in last 12-18 months have been conversion projects. ”

"As a company we value the process of conversions. We do a lot of rebranding for brownfield projects along with traditional conversion processes. Rebranding has been our focus as you're able to visualize the end product very well. Once you have a good fit with your brand, customization becomes easy. Permissions for building the product are in place, which really speeds up the process.”

“Royal Orchid & Regenta hotels has five sub-brands. Each sub-brand has defined parameters as far as structural layout, designs, brand standards, service standards, brand ethos and brand persona. Parameters

are also based on past business, location,

growth potential and several third party

factors like market buoyancy. ”

“SAMHI understands the importance of conversion thoroughly. It is currently present in 14 cities, working with 8 brands and has acquired 29 hotels, which were stressed properties. It is now looking to focus on tier 1 and tier 2 cities in the coming years and have plans to spend around upwards of Rs 200 crore in renovation and rebranding of these assets.”

Anika Gupta, Director Development - Eurasia, Wyndham Hotels & Resorts

Chander Baljee, Managing Director, Royal Orchid Hotels

Dhruv Hoon, VP Hotel Development, Marriott Hotels

Gaurav Sharma, Director Investments, SAMHI Group

"Amongst several advantages, Conversions assure income from day 1. The property also sells better through large consolidators like travel agents and online portals at a premium due to the branding advantage."

“The simple reason our brand goes for a conversion is the location and timing at which the product is making an entrance. The main challenge that we resolve for traditional hoteliers is that can we integrate the key design ingredients.”

Nikhil Sharma, COO, Ginger Hotels

"After coming on board, these hotels have witnessed higher occupancies and significantly higher ADRs thereby resulting in higher revenues. Our robust sales and distribution network, lends them the additional strength to outperform their competitors. Lemon Tree Hotel's unique business model is definitely bringing them value and advantage as they gain from our best in class ratios and great culture.

Rohit Vig, Managing Director India,StayWell Group

Vikramjit Singh, President, Lemon Tree Hotels

MUMBAI2nd Floor Modi House,Dalia Industrial Estate,Off Andheri Link Road, Andheri (W),Mumbai 400053Maharashtra, India.Phone: +91 22 26398153Email id: [email protected]

USA1100 Frank E Rodgers Blvd S,APT 270, Harrison New Jersy, 07029, USAPhone: +1(908) 485-8475

AUTHORS

NANDIVARDHAN JAINCEO, Noesis Capital Advisors

Email id: [email protected]: +91 9223368382

VIKRANT TAMBEHead - Transactions, Noesis Capital AdvisorsEmail id: [email protected]: +91 9920664006

DESIGNED BY

SHREYA PATILDesign Head

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